TransferWise Borderless Account: can it save you money?

TransferWise has launched a multi-country account that allows you to 'bank like a local' in the UK, Australia, United States and Europe. But how does it stack up as an international banking option?

The Borderless Account is aimed at those that travel, live, study or work abroad, as well as those that are based in the UK but need to transact in multiple currencies.

Which? takes a closer look at how it works, how much you could save and whether it makes sense to apply.

How the Borderless Account works

The Borderless Account, which is free to open, essentially provides four sets of international bank details from a single platform.

It allows you to receive, send, spend and convert money in one account at the official exchange rate (the one you see on Google), which may be particularly appealing if you're living in one country, but are paid in the currency of another.

When you open an account, you'll get a bright green contactless Mastercard debit card and be issued with:

• A UK account number and sort code
• A European International Bank Account Number (IBAN)
• An Australian account number and Bank State Branch (BSB) code
• A United States account number and routing number

With these 'local' bank details, you can get paid euros, pounds, Australian dollars and American dollars without a fee.

You can manage all the accounts via the app or through the online dashboard.

What are the costs for spending, moving and withdrawing money?

You won't have to pay to receive and spend money in the local currency for each account. So, if you're paid in dollars, you can spend in the US free of charge.

If you spend in any currency (there are over 40 to choose from) other than the one you're holding - say, if you deposited US dollars and spend in pounds - the amount will be converted at the interbank rate, plus a conversion fee.

The conversion fee varies depending on the currency you want to spend in, but ranges from 0.35% to 5%. You can check the conversion fee rates here.

If you want to send money to another bank account in a different currency, there is a fixed fee plus the conversion fee.If you are transferring money out of your account in the same currency, you only pay the fixed fee.

The fixed fee is fairly low. For a transaction in pounds sterling, for example, you'll pay 50p.

The Borderless Account also offers fee-free cash withdrawals with the debit card on up to £200 each month, but there's a 2% fee if you exceed this limit.

How much will I save on international transactions?

Each time you try to move money abroad with a high street bank, you generally face an inflated exchange rate and a whole host of fees.

TransferWise says that the Borderless Account allows people to send and spend money at the real interbank exchange rate and offers cheaper conversion fees compared to high street banks.

The firm commissioned Consumer Intelligence to analyse how the account compares to Lloyds Bank, Barclays, Santander and NatWest. The table below sets out the costs to send, spend and withdraw £200 in euros with the four UK banks.

Source: Consumer Intelligence research for TransferWise April 2018

According to the analysis, Santander Everyday customers stand to save over £20 on the cost of sending £200 to Europe with the TransferWise Borderless account.

However, this analysis should be taken with a pinch of salt.While the fees may be more, these high street banks also offer the advantage of branch networks and full-service banking, including account features such as overdrafts and direct debits.

Some high street competitors also offer appealing international transfer rates, so it's worth shopping around. Metro Bank offers fee-free spending in Europe with its current account, while theHSBC Advance account allows you to open an international account in 37 different countries and make fee-free transfers between them.

We approached the banks featured in the report to comment on the analysis of their fees.

A Lloyds Bank spokesperson said: 'We believe the cost of making international purchases, withdrawals and payments through Lloyds Bankis comparablewith other major high street banks.

'Many of our customers value the high level of service we provide, and the convenience and security of being able to make a payment from their own bank account - either in person in branch, over the phone, or online.'

Can this replace opening a bank account abroad?

The TransferWise Borderless Account is an electronic money account, so might not be suitable to completely replace your bank account at home or abroad.

It doesn't offer an overdraft, there's no interest on balances and you won't be able to set up direct debits or standing orders for your bills.

While the bank details are unique, and allow you to hold money, they don't represent a real bank account. So you may not, for example, be able to use it as proof of residence and you won't be able to go into a branch.

The main benefit over traditional accounts is that you won't be charged inflated exchange rates and the transfer fees are fixed.

Is my money protected?

The TransferWise Borderless Account is not covered under the Financial Services Compensation Scheme.

However, as it's an authorised Electronic Money institution regulated by the Financial Conduct Authority in the UK, the firm must stick to strict rules to keep customer money safe.

This means all money is ring-fenced in a separate bank account, so if TransferWise were to go bust, you would get your money back.

How safe are purchases?

TransferWise says that payments made with the debit card are covered by Mastercard's chargeback scheme.

Is the account good for cheap travel money?

If you're looking for a cheaper way to spend on your holidays, the account may not be your best option.

While TransferWise offers a near-perfect exchange rate, it also charges a conversion fee.

By contrast, many specialist travel credit cards or prepaid cards charge no fees at all. And with some prepaid cards, you can also avoid an ATM fee.

For cheaper ways to spend abroad, take a look at the best travel credit cards and the best prepaid cards.

If you'd prefer to use a debit card, you need to watch out for cash and transaction fees. A number of challenger digital banks, such asMonzo and Starling,also offer fee-free spending abroad at the real mid-market rate.

You can find the cheapest deals using our guide to the best debit cards to use abroad.

Other alternatives for cheap international money transfers

Ipagoo allows you to open accounts in multiple countries and spend with a prepaid debit card.

The accounts offer free internal transfers, incoming transfers from the Single European Payment Area (SEPA) and three free international transfers each month.

But, each account you open and each prepaid debit card you hold will attract a monthly fee and there are additional fees for actions like cash withdrawals.

With Revolut, you can open a UK and European account that comes with a prepaid debit card, which allows you get £200/u20ac200 of free cash withdrawals globally per month. You can also transfer 25 currencies at the real exchange rate.

Premium customers also get access to disposable virtual cards.